OUTPUT from Wales’ all-important service sector has climbed to its highest level since before the recession, new figures have revealed.

Official figures released by the Office for National Statistics in Newport showed that Wales’ output from services in the second quarter of this year was higher than at any time since the first quarter of 2008.

The Index of Market Services for Wales hit 109.8 in the three months to June, the highest figure since the 110 posted in the three months to March 2008.

All the figures in the series are benchmarked against the output for 2009 (which is indexed at 100) with figures calculated up to the latest quarter and back to 1999.

Wales’ service sector performance also compares favourably with the UK as a whole, with the Welsh index 9.8 points higher against the 2009 benchmark, compared to a rise of just 2.5 points for the UK.

The performance of the service sector is key to Wales’ wider economic prospects as it accounts for 45% of the Welsh economy.

David Pickernell, professor of economic development policy at the University of Glamorgan Business School said the figures suggested some good news for the Welsh economy, but warned that the service sector recovery was stop-go in nature.

"The latest market services figures for Wales, as compared to the UK, make very interesting reading," he said. "In particular they illustrate the bumpy road that the economy in both Wales and UK more widely is currently taking.

"Broadly the figures show that output from the market service sector in Wales is at its highest level since Q1 2008, the quarter before the recession began, and that over the last year market services have risen by 4.9% in Wales as compared with only 1.9% for the UK as a whole. Conversely, however, compared to the previous quarter, services in Wales have grown more slowly than for the UK as a whole.

"Moreover, this pattern is repeated across a number of the parts of the economy deemed of particular importance by the Welsh government.

"For example, Professional and scientific activities did particularly well in the last year, rising by 12.4% compared to only 3.9% for the UK as a whole. Compared to the previous quarter, however, they actually contracted, and by more than in the UK.

"Distribution, accommodation and food services, have also grown more quickly over the last year than their UK-wide equivalents. Over the last quarter, however, performance was inferior to the UK level.

"Indeed only for Financial and Insurance Activities and Information and Communication activities has Wales seen year on year and quarter on quarter growth and a superior performance to the UK as a whole."

He added: "It is important to remember, however, that services in Wales were harder hit by the economic crisis and that overall the service sector has rebounded better than the UK as a whole. These figures therefore indicate some relatively good news for the Welsh economy, but also that any economic recovery is likely to be stop-go in nature in the short term at least."

Graham Morgan, director of South Wales Chamber of Commerce, said the positive figures backed up anecdotal evidence from Chamber members.

"These positive figures reinforce what we’ve been saying for quite some time at the Chamber – that things are not necessarily as bleak as some would have us believe," he said.

"Our latest Quarterly Economic Survey that was published at the beginning of this month revealed a confidence within the South Wales business community, many of whom were doing better than at the beginning of the year, and predicting a good 12 months ahead in terms of turnover. This confidence has been largely confirmed by the figures released by the ONS.

"It is encouraging to see that Wales is punching above its weight, in comparison to the rest of the UK, when it comes to the service sector, which accounts for 45% of the Welsh economy. We’ve long been known as a hotbed for the financial and insurance industry, but perhaps less so for real estate, so that’s a pleasant surprise.

"This is a great platform to really drive the opportunity presented by the Central Business District/Financial Services Enterprise Zone as a means of attracting inward investment/London outsourcing to Wales."

According to the ONS figures output from the Financial Services and Insurance sector in Wales is now at its highest level ever recorded by the index. This follows years of sustained growth only slightly dampened by the financial crisis. The figures show that, as a result of that protracted growth, output from Wales financial services and insurance firms is now more than triple the level indexed at the end of 1999.

Graeme Yorston, chief executive at Principality Building Society said prudence had been necessary in the financial sector in recent years, but there were now significant opportunities for Welsh players such as Principality.

"We took a deliberately cautious approach to risk and made sure that our balance sheet was absolutely secure, which has helped us withstand the volatility within the industry over the past four years," he said.

"There is no doubt that there are still challenges ahead, but there are also massive opportunities, particularly as a trusted mutual in the current climate, and we are looking forward to controlled growth. Wales is, and will continue to be, a great place to do business."

A Welsh Government spokeswoman said: "These latest statistics indicating a recovery are to be welcomed as the Index of Market Services accounts for around 45% of the Welsh economy. However, there is no room for complacency as Welsh data results can be more volatile compared to their UK level counterparts due to the smaller survey samples."